The E-mini S&P 500 is trading cautiously due to rising global tensions and uncertain U.S. economic conditions. Talk of tariffs on 14 countries raises worries about potential retaliation and inflation risks as the third quarter approaches. With supply chain issues, companies are adjusting their earnings forecasts. The FOMC minutes show a split among members over interest rate strategies: some want to lower rates by September, while others are hesitant due to ongoing inflation concerns.

Rising Energy Costs

Increasing energy costs and a flat U.S. yield curve are affecting stock valuations, especially in high-risk sectors like technology. The stronger U.S. dollar is putting pressure on multinational earnings and pushing investors towards safer assets like gold. Historically, July and August are volatile months, with low trading volumes increasing the chance of large market swings. ETF flows and COT positioning indicate that institutions are beginning to de-risk, while retail investors remain optimistic. Currently, the S&P 500 is trading between 6,250 and 6,330, with important breakout levels highlighted. There’s a general feeling of risk aversion due to geopolitical tensions and uncertain Fed policies. It’s advisable to use short-term and reactive trading strategies right now. Traders are looking for chances to enter long positions around 6,245. If the index breaks above 6,315, it could trigger momentum trades aiming for targets of 6,380 and higher. While there is a short-term bullish outlook, staying flexible is important, as uncertainties persist. The content suggests that equity index futures are cautious as July progresses. There is a sense of unease driven by a mix of factors, including global tensions and U.S. policy disputes. Proposed import tariffs on various trade partners are raising concerns as Q3 approaches. The risks are not only about direct retaliation but also the pressure on consumer prices and logistics right as companies finalize profit expectations. The FOMC minutes reveal more than just indecision; they show clear division. Some members support easing in September, worried about slowing growth, while others focus on persistent inflation. This creates uncertainty around monetary policy, which is crucial for interest-sensitive assets. The bond market reflects this unease, as the yield curve remains flat—often a sign that economic growth may slow more than central banks anticipate.

Institutional Sentiment Shifts

From our perspective, the decline in risk appetite is worsened by rising energy prices. It’s not only about fuel costs but also their impact on manufacturing, shipping, and consumer behavior. With the dollar strengthening, earnings for big names in the S&P are under pressure, leading some institutional investors to seek safer positions. The increase in gold holdings and movement away from high-risk sectors underscores this shift. Data from ETFs and futures reports show that major players are reducing their net exposure. Yet retail sentiment, often less tactical, remains generally positive, suggesting a possible disconnect. This might result in false breakouts or exaggerated market moves if sentiment suddenly shifts. During July and August, such scenarios are more likely as lower trading volumes mean that orders can have a bigger impact. Volatility often lurks in smaller liquidity pockets during summer, only to spike unexpectedly. Looking at price action, the S&P 500 is currently hovering between 6,250 and 6,330, with dips towards 6,245 seen as attractive for new long positions. However, this approach relies on reacting to movements rather than predicting them. If prices break and hold above 6,315 on strong volume, momentum traders could jump in, targeting 6,380 or higher in quick moves. We should stay adaptable. With geopolitical tensions and policy disagreements pulling in different directions, it’s unwise to stick to a single view. Short-term, well-managed strategies that respond to market conditions are better suited for this environment. Monitoring volatility and yield spreads can provide early warnings. Long-term strategies can be reintroduced when we assess the impact of tariffs and how unified the Fed members are. Until then, discipline is more important than conviction. Create your live VT Markets account and start trading now.

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During the early Asian session, USDJPY fell due to broad selling of the dollar, partly influenced by discussions within the Federal Reserve. This drop found support at the 100-hour moving average, allowing for a recovery. In the North American session, the price rose. On the 4-hour chart, significant resistance is near the 38.2% retracement level of 147.135, from the decline since January, just below the weekly high of 147.175. A swing area between 147.01 and 147.338 has consistently acted as a ceiling.

Technical Factors Dominate

If USDJPY breaks above this resistance, it could retest the June high of 148.02, possibly extending to 148.56-148.72. The support at the moving average indicates that buyers are in control and the sentiment is short-term bullish. However, the key question is whether buyers can maintain their momentum above the 38.2% retracement level. To keep this momentum going, buyers need to stay above 147.135. If they fail to break this level, sellers might return, making the near-term outlook more neutral. Currently, we see a classic tug-of-war between short-term buying and broader hesitance around policy signals. The initial dip in USDJPY during the Asian hours, bouncing at the 100-hour moving average, demonstrates that technical factors are driving intraday decisions. It’s more about responding to specific levels rather than firm beliefs. Although the bounce wasn’t strong, it gained enough traction during the North American session to revisit a familiar resistance area. The 38.2% retracement around 147.135 has become a clear battleground. On the price chart, it represents a point where sellers from the January decline might feel encouraged to return.

Market Observations

However, the market action suggests indecision. The highs around 147.175 keep getting tested but fall just short of sustained movement. With resistance holding between approximately 147.01 and 147.338 after several attempts, we’re observing signs of buyer fatigue at these levels. Now, staying above 147.135 is crucial for aiming at the June high of 148.02. The path forward is challenging, as beyond that level, there is a thicker range between 148.56 and 148.72 that has yet to be tested. To reach that, decisive buying is needed, not just reactive spikes. Instead of chasing price strength, we’ve opted to watch for signs of consolidation above key levels. Particularly, the area just below 147.01 hasn’t shown a strong close in recent sessions. Traders taking long positions should be cautious, as price often quickly rejects that area, leaning toward mean reversion strategies if momentum falters. It’s important to watch how positions change if the price moves below the 38.2% level. In that case, renewed selling pressure is likely, as sellers would feel secure re-entering this range. We suggest that shorter-term timeframes, like one-hour charts, may provide clearer signals in the upcoming sessions, especially during pullbacks with decreasing volume. We will keep an eye on attempts to break above resistance. Sustained movement above 147.34 would disrupt this range-bound action and necessitate a reassessment. Until then, the trading environment remains technical, with impulses being optional rather than directional. Create your live VT Markets account and start trading now.

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Russia’s central bank reserves have seen a slight increase, moving from $687.7 billion to $690.6 billion. This rise in reserves points to changes in Russia’s financial situation.

The AUD/USD Pair

The AUD/USD pair has gained for three consecutive days, approaching a key resistance level of 0.6600, bolstered by the Reserve Bank of Australia’s position. Conversely, the EUR/USD pair has dipped to around 1.1660 as the US dollar strengthened. Gold prices are adjusting and currently sit near $3,300 per troy ounce. Ripple’s XRP has continued its upward trend, reaching about $2.49, benefiting from a broader surge in the cryptocurrency market. New US tariffs have been announced unexpectedly, impacting Asian markets. Singapore, India, and the Philippines could benefit from favorable concessions.

Foreign Exchange Trading Risks

Trading in foreign exchange involves significant risks, and leverage can magnify both gains and losses. It’s crucial to understand these risks and consider seeking independent financial advice. The opinions expressed in this content represent the authors and aim to provide general market commentary. There is no guarantee regarding the accuracy of information, and errors or omissions may exist. We’ve noticed a small but significant increase in Russia’s central bank reserves, rising from $687.7 billion to $690.6 billion. This roughly $2.9 billion increase may seem minor, but it suggests ongoing adjustments in asset management or changes in energy-related earnings. For those monitoring the overall economic climate affecting commodities and currency markets, this subtle shift is meaningful. Growing reserves could indicate resilience, serving as a safety net for policymakers dealing with external challenges, such as sanctions. In currency markets, the Australian dollar has performed well over the last three days, getting closer to the 0.6600 level against the US dollar. Historically, this level has presented resistance. The recent upward movement has likely stemmed from steady guidance from the Reserve Bank of Australia, rather than a major shift in global risk dynamics. If the current stability from the monetary authorities continues, speculative trading could persist toward that resistance, though actual movement will depend on upcoming Chinese data and general sentiment around commodities, particularly iron ore. Meanwhile, the euro has weakened slightly, with the EUR/USD pair pulling back to around 1.1660. This decline appears more linked to the strength of the US dollar rather than weakness in the euro itself. It’s essential to note that recent US data and hawkish statements from policymakers in Washington have increased short-term demand for the US dollar, especially against lower-yielding currencies. For now, we are observing if this USD strength becomes a trend or pauses as profit-taking occurs before significant inflation data. Gold has also retreated from its higher levels and now hovers just under $3,300 per troy ounce. Although it remains relatively strong, this drop may relate to shifting expectations about interest rates in North America. Traders should watch how real yields—returns adjusted for inflation on government debt—are changing, as they often influence gold prices. Even a slight uptick in 10-year yields could exert downward pressure. In the cryptocurrency market, XRP continues to rally, reaching around $2.49. This rise fits well with a broader increase in digital assets. While XRP’s charts indicate strong buying activity, there is a relationship at play, especially with Bitcoin’s recent sentiment shifts. These rapid movements, although potentially profitable, can lead to quick opposite swings. Keep an eye on volatility and fund flows within alternative coins for early signs of a reversal. On the trade policy front, we’ve been surprised by new US tariffs affecting various Asian economies more than expected. However, officials in Singapore, India, and the Philippines may find themselves in a better position to negotiate more favorable trade terms, possibly avoiding the most severe impacts of the new structure. This creates a brief opportunity for hedging against instability, especially for those invested in regional indexes or sector-specific ETFs linked to manufacturing and exports. As we move forward, we recommend carefully reviewing exposure to foreign exchange pairs in the near term. Recent fluctuations may encourage the excessive use of leverage, which can penalize those who join trends that might be reaching their limits. Instead, focus on key pivot levels on daily timeframes and assess liquidity conditions before making trades. Create your live VT Markets account and start trading now.

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The President is pushing Federal Reserve Chairman Jerome Powell to lower interest rates, likely in hopes of appointing a more flexible successor. However, with inflation consistently above the Fed’s target for the past four years and tariffs affecting prices, justifying rate cuts is tough right now. Jobless claims are the highest they’ve been since 2021, hinting at a weaker job market. Yet, initial jobless claims have dropped for three consecutive weeks after a minor rise in early June, suggesting there isn’t a widespread layoff trend. The June non-farm payrolls report showed an increase of 139,000 jobs, while the ADP and ISM services data were softer. But there are no major warning signs. A new budget package, which keeps corporate tax rates low and encourages investment, might boost business spending and hiring. Changes in immigration policy are also contributing to wage inflation and record stock market highs. This can lead to increased investment, spending, and consumer confidence. However, the market’s expectation of nearly 97 basis points of rate cuts this year seems overblown given the current economy. The economy is sending mixed signals. On one side, inflation remains above targets, largely due to trade policies that raised import prices. This supports a case for maintaining interest rates to avoid pushing prices even higher. On the other side, job data isn’t clear-cut either. Rising continuing jobless claims typically indicate a softer job market, suggesting that unemployed people are struggling to find new jobs. Still, initial claims suggest the opposite, as they have dropped after a brief rise. This early data is usually more reflective of immediate business trends. So far, large layoffs haven’t occurred. Payroll growth is steady—not dramatic—but still shows hiring isn’t collapsing. Fiscal support from the budget, which sustains corporate tax rates, gives businesses some room to invest. This stability is crucial for job creation despite relatively high borrowing costs. Additionally, the record strength in stock markets stems from tax strategies, productivity gains, and increased consumer demand—partly from immigration. As stock markets rise and consumer confidence grows, companies may feel less urgency to lower rates. However, market expectations for nearly 100 basis points of easing in a year may be too optimistic. This pricing suggests a much weaker economy than what current indicators show. While some signs point to a slowdown, they don’t justify four rate cuts. Overreaching on this assumption could backfire if the data continues to show resilience. Futures contracts may be leaning too far in their expectations. Stock valuations, borrowing expectations, and rate-sensitive investments could react sharply if the anticipated policy changes don’t materialize. Powell hasn’t indicated he will take inflation risks lightly, and significant shifts may not happen until wage pressures and service prices decrease. Thus, we should brace for potential rapid adjustments in pricing. If rate cuts happen more slowly or in smaller increments, especially front-end positions will need adjusting. Political influences also play a role, as the President may influence the central bank leadership through new appointments. However, monetary policy must still navigate through inflation data challenges, which can’t be easily ignored. Moving forward, it’s crucial to focus on wage data, consumer spending trends, and core PCE inflation. These factors will significantly influence real policy changes. While it’s fine to prepare for easing scenarios, we must also consider that cuts might arrive later and more gradually than anticipated. This gap between expectations and reality could lead to swift market adjustments.

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Silver (XAG/USD) is stabilizing after bouncing back from a three-day decline as market sentiment shifts to caution. This change is driven by new global trade tensions and falling US Treasury yields, which are increasing demand for precious metals. Currently priced around $36.63, the metal has eased from a daily high of $36.85. Silver found support near $36.30 and rebounded after the US threatened new tariffs on countries like Algeria and the Philippines, with rates expected to be between 20% and 50% starting August 1. Minutes from the Federal Reserve’s June meeting suggest possible rate cuts later this year, although inflation risks from tariffs might be temporary. Technically, Silver has been trading in an upward pattern since April, moving between $35.50 and $37.00 in recent weeks, with $37.30, a 13-year high, being a significant resistance level. The Relative Strength Index (RSI) is around 58, showing bullish momentum. The Rate of Change (ROC) is about 1.76, indicating moderate upward pressure. If the price breaks above $37.00, it could rise to $38.00-$38.50. Initial support is at $36.22, followed by $35.50, and $34.50 if bearish conditions take hold. Currently, silver prices are steady after a brief drop, but they haven’t exceeded recent highs. The price has responded positively to the new trade tensions and lower bond yields, both of which support metals like silver. A slight decrease in US Treasury yields lowers the cost of holding silver, which doesn’t provide yield but typically becomes more attractive when growth or interest expectations drop. The Federal Reserve’s June meeting hinted at potential interest rate cuts this year. However, tariff-related inflation could complicate this timeline. The Fed views these inflation pressures as temporary rather than long-term hinderances, which is important for those investing in rate-sensitive assets. From a structural viewpoint, silver has been following a clear upward trend since early April, showing consistent higher lows and resistance around $37.00. RSI readings just below overbought levels indicate there is still room for buyers, though the path isn’t entirely clear. The Rate of Change metric around 1.76 shows that price movement has upward momentum, but it’s not explosive—more of a steady rise. What does this mean for positioning? For those managing risk, the crucial pivot remains at $37.00. A firm move above this level may not ensure a strong breakout, but it could increase the chances of reaching $38.00 or even $38.50. Conversely, if sellers push the price below $36.22, especially on high volume, the next support level will be closer to $35.50. If this support fails, it could lead to a breakdown of the channel, allowing a test near $34.50. Traders should view these levels as zones that may trigger trading activity, especially around expiration dates or significant economic announcements. Price movements in the next few sessions could be volatile, especially with headlines about tariffs or guidance from US officials. If this continues, silver might remain in demand as a perceived hedge. It’s important to keep a close watch on the 13-year resistance at $37.30, as it could lead to long-term interest or profit-taking depending on how quickly it’s approached. We will also monitor implied volatility, which might increase if macroeconomic factors become more unpredictable. Hedging strategies should be reassessed, particularly for those holding short gamma positions. Pay attention to market expectations for interest rates, especially in swaps and futures, as these influence fixed-income assets—and consequently, metals related to inflation and policy changes. As always, risk management must remain flexible. Open interest at the top of this range suggests traders are active but not yet fully committed to a breakout or reversal. This hesitance is noteworthy. Any sudden shift in dollar strength or changes in bond auctions could upset this balance. For now, upward movement remains intact but is not aggressive. Any significant directional bets need to be supported by data or confirmed technical breakouts.

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The AUDUSD currency pair is currently fluctuating within a range, with a slight bullish tilt following the Reserve Bank of Australia (RBA) keeping its benchmark rate unchanged, instead of cutting rates as expected. This decision boosted the Aussie dollar and pushed the AUDUSD higher. However, attempts to break through key resistance levels between 0.6535 and 0.6556 have failed, as prices fell due to a stronger US dollar. Earlier this week, sellers had a chance when the AUDUSD dropped below the 200-bar moving average on the 4-hour chart, but the RBA’s decision reversed this trend, lifting prices above both the 100-bar and 200-bar moving averages at roughly 0.6522 and 0.6506. The pair remains in a swing area, maintaining a neutral but slightly bullish outlook because it is above these moving averages.

Sellers and Buyers Strategies

For sellers to regain strength, they must break below the 100-bar and 200-bar moving averages consistently, with a target set at a 50% retracement around 0.64809. On the other hand, bulls need to regain the 0.6556 level and aim for recent highs near 0.6590 to strengthen their position for further gains. The pair is currently in a standoff, influenced by central bank decisions and technical levels. So far, the market’s response to the RBA’s pause in rate cuts has been quite typical. By not lowering rates, the RBA provided the Australian dollar with a sense of resilience. This caused the AUDUSD to rise but not firmly enough to surpass the ceiling around 0.6556. Each time the pair approached this level, it faced resistance, indicating that buyers are hesitant without a strong reason to push higher. The recent price movements have positioned the pair slightly above the 100- and 200-bar moving averages on the 4-hour timeframe, offering some comfort to long-position traders. These averages—around 0.6522 and 0.6506—are now short-term benchmarks. As long as prices stay above these levels, it suggests a modest underlying strength.

Market Dynamics and Price Action

A move below these averages, however, would shift the focus back to sellers. Such a drop would not merely be a minor setback; it would open opportunities for a test of the 50% retracement level at 0.64809. This level is significant not only because it represents the midpoint of the latest swing, but also because traders have shown interest in it recently, even if briefly. The price action reflects a battleground where both buyers and sellers have met. On the flip side, buyers will feel more at ease if they can reclaim the area above 0.6556 and push towards recent highs around 0.6590, breaking free from the current sideways movement. Recently, the price has bounced between tight boundaries, but if the upper limit is broken and held, the chart’s character will change from indecision to a more structured upward movement. Our focus is not on dramatic breakouts or reversals. Instead, we keep an eye on how the pair behaves around clearly defined technical areas—especially near moving averages and retracement levels. These indicators are not random; they mark real pivots where interest frequently arises. The short-term volatility isn’t the main concern—it’s about establishing a consistent direction. This requires strong commitment from one side, which has been missing so far. Daily trading ranges are tight, caught between cautious optimism from Australia’s rate outlook and pressure from the stronger US dollar. From our perspective, this standoff offers a clear framework. Movements toward and away from these key levels can serve as practical entry points if they align with larger trends. Reactions should be quick and responsive during this range-bound phase. Pay attention to how the market opens and closes around these levels; they will indicate when one side finally gains enough traction to influence the next significant price move. Create your live VT Markets account and start trading now.

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The US Department of Labor reported a drop in Initial Jobless Claims to 227,000 for the week ending July 5, down from a revised figure of 232,000 the week before. However, Continuing Jobless Claims increased by 10,000, reaching 1.965 million as of June 28. The seasonally adjusted unemployment rate remains stable at 1.3%. The four-week moving average also fell by 5,750, now at 235,500 from last week’s revised average.

Impact On Currency Markets

These figures affected the market, pushing the Greenback to daily highs and the US Dollar Index close to 97.70. This marks a positive turn from losses the day before. Understanding the job market is essential for evaluating the economy, as it influences currency values. High employment rates can boost consumer spending and support economic growth. Tight labor markets can lead to higher inflation and impact monetary policy due to rising wage pressures. Wage growth is critical for economic understanding, affecting both consumer spending and inflation. Policymakers consider this when setting monetary policies, with some central banks giving more weight to employment levels than others. Central banks have different priorities regarding employment based on their goals. The US Federal Reserve, for example, aims for maximum employment alongside stable prices, while the European Central Bank focuses more on controlling inflation.

Employment Data And Economic Implications

With initial jobless claims down to 227,000, we gain clearer insights into the short-term economic climate. This slight decline from the revised 232,000 suggests a somewhat stronger labor market than expected. While this appears encouraging, it’s essential to look at the bigger picture. Continuing claims rose by 10,000 to 1.965 million, a number that holds significance for long-term job stability. The insured unemployment rate remains low at 1.3%, indicating that those who do lose jobs are not unemployed for long. The decrease in the four-week average to 235,500 implies a smoother trend in initial claims, reinforcing the idea that layoffs are not accelerating. We are observing a labor market that remains tight but isn’t expected to tighten further soon. These figures aren’t standalone; their effects ripple through the economy, particularly impacting wage inflation, consumer sentiment, and policy decisions. Currency markets responded quickly. The Greenback gained strength, and the US Dollar Index hit 97.70, recovering from the previous day’s dip. This rebound suggests that solid labor data alleviates pressure on the Federal Reserve to change policy soon. When fewer people are losing jobs, families feel less pressure on their spending, which can help prevent inflation from dropping too quickly. For those of us in derivatives markets, these statistics carry important implications. A drop in jobless claims, coupled with rising continuing claims, poses mixed risks. Some industries may slow hiring, while others continue to fill positions easily. The difference between initial and continuing claims is significant; it indicates how long economic disruptions may last and whether challenges in the job market are temporary or prolonged. Wage dynamics, though not directly represented in these numbers, remain a critical consideration. Sustained employment raises the likelihood of either persistent wage pressures or renewed growth. Policymakers, especially at the Federal Reserve, closely monitor wage trends to determine if inflation is temporary or more ingrained. Different monetary authorities prioritize employment based on their main goals. The Fed balances full employment with price stability, while the ECB focuses mainly on inflation. This difference leads to distinct responses to similar data. Stronger employment in the US might prompt tighter policies by the Fed, while in the euro area, labor improvements may not lead to policy changes unless inflation expectations shift significantly. As we analyze this data, remember that the numbers don’t act alone; they influence volatility, future guidance, and expected rates. Let these insights inform your decisions, but don’t let them dictate your views. Pay attention to how expectations around inflation and interest rates change. Notice how employment data can shift yield curves and affect currency spreads. In the near term, trades should acknowledge this positive labor signal while recognizing its limitations. The contrast between falling initial claims and rising continuing claims sends a mixed message, suggesting that hiring strength is not fully back. This nuance can benefit those who look beyond the surface. Create your live VT Markets account and start trading now.

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The USDCAD is rising in early North American trading, supported by better initial jobless claims data. After bouncing off the 1.3555 support level, the pair is maintaining a strong upward trend, staying above the 2025 low of 1.35389. This bounce has helped keep the overall bullish momentum going. A low point formed in an important range between 1.3617 and 1.3633, which has acted as both support and resistance in the past. Currently, the price is above the 100-bar and 200-bar moving averages on the 4-hour chart, near 1.3670–1.36835. Moving back above these averages indicates a return to buyer control, especially since the price had fallen below them earlier. The first target is this week’s high at 1.37094, followed by the 38.2% retracement from the drop that started in April, at 1.37208. If the price breaks above this, more gains could follow, with the target area at 1.37498 to 1.3759. If the price stays above this area, it could signal a medium-term bullish breakout. However, if it falls back below the 100-bar and 200-bar MAs, the current bullish momentum may fade. Buyers are in control as long as the price stays above these levels. The original points highlight a recovery in the USDCAD, driven by strong US jobless claims data. This suggests a resilient labor market and supports the US dollar. The technical setup shows a move away from previous lows, with prices rising above key moving averages on the 4-hour chart. This shift usually indicates positive sentiment among market participants, especially as pricing used the 1.3555 level as a launch point. The rise above the 100-bar and 200-bar averages around 1.3670 suggests renewed confidence. Previously, these averages acted as resistance but may now provide support if there’s a pullback. The next level to watch is 1.37094, the recent weekly high, followed by the retracement level from the April drop near 1.37208. If upward pressure continues, we could see the price approach just below 1.3760, a level it has struggled with before. Traders in short-term derivatives, especially those dealing with intra-day or multi-session trades, should pay attention to how the price interacts with 1.37208. If it breaks above convincingly, we could see a quick move toward 1.3750 and beyond. The previous congestion zone of 1.37498 to 1.3759 could either limit gains or serve as a strong support area, depending on market sentiment. If the momentum slows, falling below both the 100- and 200-bar lines would indicate weakness. At that point, attention would shift back to the 1.3617–1.3633 range, which has shown sensitivity to buyers and sellers. Breaking below that could bring the previous 1.3555 level back into focus. With this context, we’re monitoring for signs of strength or weakness around these technical levels. Price movements in the coming sessions should be assessed carefully, especially during data releases or times of low liquidity. Each level mentioned has historical significance, which often influences short-term trading decisions. It’s essential to time entries around these key points, while managing risks closely, in the upcoming days.

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Initial jobless claims for the week ending July 5 were reported at 227,000, which is lower than the expected 235,000. The previous week’s number was revised down from 233,000 to 232,000. The four-week moving average of jobless claims is now 235,500, down from 241,500. Continuing claims reached 1,965,000, slightly below the expected 1,974,000, but up from the previous 1,964,000.

USD/JPY and Market Reaction

Before the data release, USD/JPY was at 146.23. After the report, it rose to 146.46. This suggests that the report may have ended speculation about a potential rate cut in the upcoming July FOMC meeting. Although continuing claims are at their highest since 2021, which suggests more challenges in finding jobs, there are no major signs of weakness in the job market. The weekly jobless claims numbers were better than expected, with fewer people applying for unemployment benefits. Specifically, for the week ending July 5, the number was 227,000, significantly lower than the consensus of 235,000. Additionally, the previous week’s figure was quietly adjusted up by 1,000. While this isn’t a significant change, it does indicate a positive trend. The four-week average has also decreased to 235,500 from 241,500. This downward trend suggests fewer job losses or a more stable job market. However, continuing claims did rise slightly to 1.965 million, indicating that returning to work is still taking longer for many. After the report, currency markets responded quickly. The US dollar strengthened against the yen, pushing USD/JPY up to 146.46. Traders clearly reacted to the stronger claims data. Many had expected weaker numbers, and when they didn’t materialize, they quickly adjusted their positions.

Rate Cut Speculations and Economic Indicators

Speculations about a rate cut were already cautious ahead of the July FOMC meeting. These jobless figures are unlikely to prompt policymakers to ease up. In fact, there’s less reason to change course right now. There’s no economic downturn at this moment. However, we cannot disregard the continuing claims data, which shows that it’s still taking longer for people to return to work. This creates a different perspective compared to the initial claims. We’re closely monitoring this overall economic situation. A strong job market, along with steady unemployment claims, makes it harder to argue for any quick monetary policy changes. This is particularly important for those checking short-term interest rates. Market pricing in options and futures will likely adjust according to this reduced chance of easing. Moving forward, it’s crucial to watch next week’s wage growth figures and any updates from regional Fed leaders. Pricing in the derivatives market may not hold if we see strong job growth alongside falling inflation. On the other hand, any upward trend in continuing claims will likely prompt re-evaluations, especially in longer-term positions. These developments are not happening in isolation. Bond yields have responded, though less dramatically. A narrower gap between short- and medium-term instruments suggests that expectations are aligning around a sustained higher interest rate stance. We will remain vigilant regarding short-dated volatility, especially around key data releases. The markets are sensitive to news, and lower claims numbers are making downside protection more valuable. Option skews are starting to reflect this shift. Other sectors, not just those tied to policy, may also feel the effects of this data. Rate-sensitive investments could become misaligned if job reports continue to show strength. Trades based on expectations of weak labor conditions may need to be reconsidered, as the focus shifts toward strength instead of weakness. Create your live VT Markets account and start trading now.

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The US economic calendar today includes initial jobless claims and a 30-year bond auction scheduled for 1 PM ET. These events provide valuable insights into the economy’s current situation. The FOMC minutes discussed interest rates. They indicated that if the job market weakens or inflation falls while expectations stay stable, the Fed might consider a less strict monetary policy. For the Fed to change its approach, jobless claims need to rise significantly. This increase might have to go beyond 250,000, possibly reaching 300,000, to catch the Federal Reserve’s attention. In simple terms, we should focus on two key pieces of information. First, the weekly data shows how many people are newly applying for unemployment benefits, giving us a clear view of the job market’s health. Second, the upcoming sale of long-term US government bonds provides insight into investor sentiment and future interest rate expectations. The minutes from the Federal Reserve’s latest meeting show that policymakers are closely monitoring both inflation trends and job market conditions. They are open to changing interest rates but require clear signals—either lower inflation or noticeable weakness in the jobs market—without disturbing inflation expectations. They are especially concerned about how businesses and households perceive future price changes. What’s notable about this discussion is the high threshold for changing rates. A slight fall in job numbers won’t suffice. The data needs to indicate a significant increase in unemployment claims—around 300,000 in a week—to convince them that the job market is weakening enough for a shift. Given this, it’s wise to be precise with timing in the coming weeks. Market pricing still shows uncertainty about future rates, which could lead to volatility around new claims data. If claims get closer to 275,000 or higher, the rate expectations reflected at the front of the yield curve could adjust more dramatically. We should also pay attention to the bond auction. The 30-year bond sale is one of the best ways to gauge long-term views on borrowing costs. If demand is low or yields rise too quickly, we may see implications for rate-sensitive investments. Strategies reliant on duration might need reevaluation in such a scenario. Moreover, if Powell and his team maintain their tough talk while remaining patient, we might see more reactions in short-term swap spreads and implied volatility than we have recently. Any surprises in this week’s claim numbers—either significantly above or below expectations—could reignite market activity. It’s better to stay vigilant before the data is released rather than reacting after it’s already priced in.

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